As FHA borrowers face mounting affordability pressure and rising delinquency rates, a new bipartisan bill called the “Mortgage Insurance Freedom Act” (HR 5508) has been referred to the House Financial Services Committee. Backed by the Broker Action Coalition (BAC), the legislation aims to deliver immediate monthly relief, without rewriting underwriting standards or putting the FHA insurance fund at risk.
Introduced Sept. 19, 2025, by Reps. Gregory Meeks (D-N.Y.) and Pete Sessions (R-Texas), the Mortgage Insurance Freedom Act would amend the National Housing Act to automatically halt FHA mortgage insurance premiums once a loan reaches 78% loan-to-value. The bill aims to bring FHA in line with conventional mortgage rules at a time when borrowers with low interest rates have no practical path to refinance out of the cost.
Under current FHA policy, most borrowers continue paying mortgage insurance for the life of the loan unless they made a down payment of at least 10 percent at origination — a threshold that is challenging among FHA borrowers, who are more likely to be first-time or moderate-income homebuyers.
Brendan McKay, co-founder and chief advocacy officer of the Broker Action Coalition (BAC), said the legislation grew out of a congressional hearing last year with FHA leadership.
“There was a hearing at the House Financial Services Committee with the director of the FHA at the time, and Congressman Gregory Meeks asked why the FHA was continuing to collect mortgage insurance on active loans with so much equity,” McKay explained. “The director’s response was, ‘I would love to see legislation addressing that.’”
Additionally, senior MBA leadership has publicly stated support for eliminating the FHA life-of-loan MIP requirement. National Urban League and National Association of Hispanic Real Estate Professionals (NAHREP) have encouraged members to support the bill and participate in outreach efforts.
The Bill's Proposed Language
The bill’s core provision would bar FHA from collecting annual mortgage insurance premiums once a loan reaches 78% loan-to-value, calculated using the lower of the home’s original sales price or appraised value at origination. The cutoff would be based on scheduled amortization, not home price appreciation, and borrowers would not be able to accelerate cancellation through prepayment. FHA would continue to collect upfront mortgage insurance premiums; the restriction applies only to annual premiums.
The legislation would apply only to mortgages endorsed after enactment and includes a safeguard tied to the Mutual Mortgage Insurance Fund. If the fund’s capital ratio were to fall below the statutory minimum of 2%, FHA would be permitted to resume premium collection.
McKay said the proposal was designed to preserve the fund’s financial health, noting that FHA’s current reserves are well above required levels. “We absolutely do not want to put the fund at risk,” he said. “We’re estimating they’re sitting on around $200 billion in the capital reserve fund right now — which is 500% more than their congressional mandated reserve amount.”
McKay also pointed to the current rate environment. “You’re not going to increase your rate by 4 percent just to get rid of mortgage insurance,” he said. “In other markets, people would simply refinance into conventional loans if they had this much equity.”
The legislation would also require the Department of Housing and Urban Development to issue implementing rules within 180 days and conduct outreach and educational activities to inform borrowers of their eligibility to stop paying mortgage insurance premiums.
McKay said eliminating mortgage insurance payments for eligible borrowers could provide meaningful monthly relief. “Based on the current average home sales price, you’re talking about $181 a month,” he said. “That’s a massive deal to a lot of people in the country.”
Issues Mount For FHA Borrowers
FHA borrowers are showing higher levels of distress than other segments of the mortgage market, even as overall mortgage performance remains historically strong. According to ICE Mortgage Technology’s October 2025 First Look at Mortgage Performance, the national delinquency rate declined to 3.42% in September. Early-stage and late-stage delinquencies improved month over month, and non-current rates fell year over year for GSE, VA, and portfolio-held loans.
FHA loans were the primary exception. ICE reported that the non-current rate for FHA loans rose 44 basis points year over year, and FHA mortgages accounted for a disproportionate share of foreclosure activity. In the third quarter of 2025, FHA loans made up 38% of active foreclosures, roughly half of the annual increase in foreclosure starts, and approximately 80% of the year-over-year rise in active foreclosure inventory. While foreclosure starts increased 23% year over year, ICE characterized the trend as a return to more typical levels, noting that overall foreclosure volumes remain well below 2019 levels and that mortgage market performance continues to be “remarkably resilient”
McKay echoed that caution on trendlines: “We’re not looking at some massive spike in the last quarter,” he said. “Looking historically, over that last 20-year period, it’s lower than most times.”
Bottom Line
If enacted, H.R. 5508 would change when FHA can collect annual mortgage insurance premiums on newly endorsed loans, setting a 78% loan-to-value cutoff calculated from the home’s sales price or appraised value at origination, and tying the policy to the Mutual Mortgage Insurance Fund’s capital ratio. The bill does not change FHA eligibility or underwriting standards, and it would not apply to loans endorsed before enactment.
For originators, the bill has implications for borrower education, long-term cost discussions, and post-closing communication, particularly for borrowers who expect to build equity but may not be able to refinance in a higher-rate environment.
McKay suggested that originators keep past clients informed, which could help more brokers retain their business. “I think sending an email to all your past FHA borrowers saying, ‘Hey, there’s active legislation in Congress right now that could save a lot of you a couple hundred bucks a month,’” he said. “They would absolutely love to hear that you’re advocating on their behalf.”
